Packer launches first foray into overhauling Ten

James Packer
returned to Sydney ­yesterday to meet
Ten Network
executive chairman
Nick Falloon
and start his push to overhaul the company.

Mr Packer, who attended a board meeting of his gaming company Crown and a meeting that saw influential media buyer Harold Mitchell’s business sold to a British firm in Melbourne on Monday, stunned the media industry last week by spending $260 million through his private company Consolidated Press Holdings to grab 17 per cent of Ten.

The meeting with Mr Falloon was expected to be cordial, with Mr Packer asking for board seats and ­outlining his ideas for boosting Ten’s revenue and earnings.

“Packer didn’t go to the meeting planning to rant and rave at Falloon," said one source. “This is all about the numbers. It’s a game of maths. He sees a lot of potential to lift Ten’s earnings and share price."

Mr Packer, who had turned his back on the free-to-air TV industry when he started reducing his stake in Nine Network in late 2006, paid $1.50 a share for his Ten stake.

Analysts estimated Ten would generate earnings before interest, tax, depreciation and amortisation of $220 million in 2010-11, compared with Seven Network’s projected $330 million earnings and Nine’s $300 million.

“Packer can’t understand how Ten, which is the lowest-cost TV network and once had the industry’s biggest profit margin, can earn so much less than its rivals," said one media executive. “Obviously he sees an opportunity to change that."

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As reported in The Australian Financial Review last week, the Ten board was not expected to reject Mr Packer’s request for board seats.

Industry sources speculated he would also ask Mr Falloon –who worked for the Packer family’s media company for 19 years, leaving ­unexpectedly in 2001 after three years as chief executive – why
Bruce Gordon
was not represented on the Ten board.

Mr Gordon’s investment company Birketu owns 13 per cent of Ten. Mr Gordon has known the Packer family for many years and his WIN Corp group owns the Nine stations in Adelaide and Perth. (The east coast Nine stations are owned by PBL Media, which is 99.93 per cent owned by private equity firm CVC Asia Pacific and 0.07 per cent by Consolidated Media Holdings, which is 50 per cent owned by Mr Packer.)

Key elements of Mr Packer’s strategy for Ten were believed to include returning the main Ten channel to its core target market of people aged under 40 – which it has drifted away from in recent years – stopping the plan to spend $20 million a year on two news programs that will launch in 2011, and restoring a 100 per cent dividend pay-out ratio.

Mr Packer was also understood to be keen for Ten to sell its Eye Corp outdoor advertising division and rejig the programming of its all-sport digital channel One, which has generated low ratings and advertising revenue since it started in March last year.

“Packer’s view is that it won’t take much to lift Ten’s performance: take some costs out and address strategic flaws such as One and the news ­programs," said one source.